Tag: Investing

If you are looking for real estate to invest in, then you certainly want to read this blog. Make sure to stay away from the ten biggest red flags that you can encounter when searching for properties.

1) Demands a Deposit
When you have not seen the property yet, do not put down a deposit. Oftentimes, scammers will pull legitimate properties from legitimate sites and then take down the posting and disappear once they get your money.

2) Pressure to Act Immediately
Scammers will pressure you to put money down and act quickly. This is typical of scammers. Doing so can cost you money and legal fees to deal with them after the fact. Go at your own pace and make sure to consult trusted people about your purchase before moving forward.

3) Instructions to Not Consult Others
Speaking more on the topic consulting others, make sure to consult your lawyers and lenders before moving forward. Discussing all investments with trusted professionals before moving forward is vital to a successful purchase.

4) Upfront Fees
Before services are actually given, no fees are allowed to be made, according to the FTC’s Mortgage Assistance Relief Services Rule.

5) Extravagant Guarantees
When someone guarantees that they can expect to make a certain ROI in a certain amount of time and that this would work for anyone buying this property, it’s time to think about another property to invest in.

6) Lack of Documentation
Some scammers promise documents, such as titles and deeds, but they never show. Make sure to get all the documentation necessary to make this deal go through before taking any steps forward.

7) Location is in a Bad Neighborhood
Many factors play into buying a home, but location is the most important. You have probably heard the common phrase, “Location, location, location!” If the home is a great place in a poor or vandalized area, proceed with caution. Stay away from slummy or run down areas. You want to make sure a location has a great school system and economy, as well as an active local police enforcement to protect the citizens.

8) Businesses Are Closing
If you are looking to invest in an area that has businesses closing, beware. You want to invest in an area that has a great economy and demand for residents. If businesses are closing, it’s likely that people are moving out of the area to better locations.

9) Photographs Looked Altered
If you are looking at a property online and the photographs look altered, you may be making contact with a scam artist. People will alter photographs to make a property look better than it really is. Make sure to visit the property first hand before making any big decisions.

10) The Property Requires Too Much Maintenance
A property that requires a lot of maintenance or seems like it would need a lot of maintenance is not a good buy. You do not want your expenses to exceed your income from the property. One way to tell if a property is like this is to see how long it has been on the market. Make sure to do your research on properties to find out if they have been on the market for too long.

Do you think there are other red flags to watch out for? Tweet me @wdarrowfiedler, and we can talk about it!

Real Estate Investing 101: From Cradle to Grave Part Two

By W Darrow Fiedler

On October 26, 2016

In Investing, Real Estate

We are back with “9 Insightful Ways to Find Real Estate” and “Finding Ways to Fund Your Investment!” Let’s dive right into it.

9 Insightful Ways to Find Real Estate

Turner recommends using the following search methods:

The MLS: The MLS is the Multiple Listing Service. This can be found on websites, such as Realtor.com or Zillow.com, making the process of finding a property a click away.
Commercial Brokers: They are knowledgeable about real estate and can help you find a great deal. They also, sometimes, have listings that are not posted yet, which they can share with you.
Loopnet: “Loopnet.com is the largest listing site for commercial and large multifamily properties.”
Direct Mail: This includes signing up for print methods of marketing for properties.
Networking: Going to investment groups and real estate minded communities are great ways to find investors, venture capitalists, real estate gurus, or even partners. Networking can prove to be extremely profitable in the real estate industry. You never know when you will need a connection.

Turner also recommends:

Driving for Dollars: This simply includes driving around and looking for properties that interest you.
Craigslist: You can search for properties on the site, post an ad to showcase your search, or search for landlords who may themselves want to sell their property or know someone who does.
Eviction Records: Eviction records are in public records; so, find some properties that are being evicted, and your likelihood of finding a property to invest in will skyrocket.
Wholesalers: Wholesalers will purchase solid properties and, then, sell them to you for slightly higher prices.

Finding Ways to Fund Your Investment
According to Paul Esajian of Fortune Builders, here are four basic ways of financing your investment opportunities.

Cash Financing: Cash is the main source of financing that anyone would want for their property. This method allows for buyers, “to save on interest, increase their cash flow, and receive instant equity in their investment.”
Traditional Lenders: Traditional lenders require about one-quarter of your down payment up front with a good to excellent credit score.
Hard Money Lenders: Hard money lenders “provide short-term, high-rate loans.”
Private Money Lenders: Private money lenders are often-times venture capitalists. They want to invest financially, as well as offer their time in being an active part of the process. “Generally speaking, private money lenders will provide investors with cash to purchase real estate properties in exchange for a specific interest rate.”

After reviewing all of this information we have above, I suggest focusing on managing your property once you have bought it. Managing your property is critical to having a successful future. You can do this yourself, which can become a full-time job at times, or reach out to a property management group to do it for you.

If you are serious about real estate investment and want to learn more, check out BiggerPockets Ultimate Beginner’s Guide to Real Estate Investing. You can find blogs on my website, wdarrowfiedler.net, regarding real estate investments, as well. Tweet me @wdarrowfiedler with comments, thoughts, or questions about real estate investing!

Real Estate Investing 101: From Cradle to Grave Part One

By W Darrow Fiedler

On October 19, 2016

In Investing, Real Estate

If you are anything like me, you know that real estate is an infinitely complex, riveting topic. The real estate industry has endless facets that one can endlessly dive deeper into. When trying to find your way around real estate investing for the first time, it can be entirely overwhelming. That is what I am here for. With almost four decades of experience in the real estate industry, I can lead you through the basics of real estate investing with ease.

The reason why anyone wants to get into real estate investments are simple: Money. One can either make billions of dollars in the industry or, to the opposite extreme, lose billions. There are literally hundreds of ways to make money and build wealth from a real estate investment, but we are going to stick with a few basics to help make the learning curve easier.

The oldest method in the book is to purchase real estate that can be rented for a profit. And example of this would be buying an apartment complex or single/multifamily home that can be turned for a profit. Gaining a profit from a real estate purchase is a marathon, not a sprint. It is a business, not a hobby. In order to make money from a real estate investment, usually one must earn just enough money from the rent that is being paid in order to cover the cost of a mortgage. Then, one can start earning a profit once that mortgage is paid off.

To begin, I will describe the ways in which one can earn money from a property and then go into the popular types of property that people purchase. In Part Two, I will dig into ways to find properties and ways to fund your investments.

4 Ways to Earn an ROI on Your Real Estate

According to Brandon Turner of BiggerPockets.com, there are four key ways of building wealth from a real estate investment, which are the following:

“Appreciation: When property values rise, the difference between what you owe and what it’s worth will increase.
“Cash Flow: When a property is rented for income, and there is more income coming in each month than expenses going out.
“Tax Benefits: Owning investment properties can help offset income from other areas of your life (see your tax advisor for more information.).
“Principle Reduction: If you carry a loan on the investment property, each month your amount owed decreases slightly. For example, if you buy a single family home with a thirty-year mortgage, after thirty years the loan would be paid off (with the help of the tenants’ monthly rent payments) and you’ll own the property free-and-clear.”

Now that you know how money is earned in this industry, I will explain the types of property that people commonly purchase.

Popular Types of Real Estate

Turner suggests there are a few different types of common real estate that people invest in for a great ROI.

“Single Family Homes,
Multifamily Properties,
Apartment Complexes, and
Commercial Buildings.”

When going into real estate, it is important to keep in mind that it is vital that you choose one type of niche in which to invest. When you spread yourself too thin across multiple different strategies for investing, you become a source of knowledge to no one on real estate. When searching for ways to fund your investment, your investors will be less likely to trust you since you are not an expert in any one field.

For “9 Insightful Ways to Find Real Estate,” and “Finding Ways to Fund Your Investment,” check back next week! Tweet me @wdarrowfiedler with any thoughts or questions.

Co-Founder of PayPal Launches New Credit Startup

By W Darrow Fiedler

On April 14, 2016

In Finance, News

Max Levchin, one of the co-founders of Paypal, has announced that he has raised an impressive $425 million of funding for his newest venture, Affirm, the mission of which is to replace credit cards with micro-loans at a point of sale.

The startup’s service, which is called “Buy With Affirm,” allows shoppers to pay forgoods online in a series of monthly installments, in lieu of one lump-sum payment that is often beyond the customer’s means. By submitting your name, cell phone number, birthday and the last four digits of your social security number, you can apply for membership, at which point Affirm’s algorithm considers a number of variables – like the regularity with which you receive paychecks and how liquid your finances are – to determine how much risk is associated with your finances and whether you are a suitable candidate to receive Affirm’s micro-loans.

With Affirm, PayPal co-founder Max Levchin is hoping to disrupt the credit industry completely.

Describing the motivation behind his new company’s mission to Fortune Magazine, Levchin pointed to the fact that many Millennials not only feel no sense of loyalty towards their banks, but actually possess a marked distrust of large financial institutions. This was shown in a research study conducted by Viacom Media, in which 10,000 Millennials were polled about Big Finance and agreed across the board that all four of the biggest banking brands were on their list of the ten least-loved brands in the USA. Levchin’s solution, then, is to provide these Millennials with a banking alternative that offers increased transparency, in addition to assistance paying off larger amounts of money.

Since Affirm’s launch, the number of merchants they’re partnered with has increased steadily. Last year, they were only used by 100 merchants, and this year, they are used by 700. According to Levchin, users are also hopping on the Affirm bandwagon in impressive numbers, and many are coming back again after their first use.

Clearly, some heavy-hitting investors agree with Levchin that when it comes to Millennial banking and credit, something’s got to give. Founders Fund, Affirm’s newest investor, just contributed $100 million to the company’s financial backing, and they have already received investments from Lightspeed Venture Partners, Spark Capital, Khosla Ventures, Andreessen Horowitz and Jeffries.

It will be interesting to see if Levchin is successful in doing for credit what PayPal did for online payments; only time will tell.

How Crowdsourcing is Changing the Face of Real Estate Investing

By W Darrow Fiedler

On March 4, 2016

In Investing, News

The process of crowdsourcing, or collecting information or funds from a variety of people to complete a project, has gained increased popularity in the past few years with the creation of a number of online crowdsourcing platforms, like Kickstarter and GoFundMe. Originally used to solicit donations to cover the cost of creative endeavors, like recording an album or shooting a movie, crowdsourcing’s applications seem to be multiplying by the day. Now, sites exist to help patients defray the cost of their rising medical bills, to help pet owners get assistance to pay off their animal’s healthcare costs, and even to help students pay for their tuitions.

As a real estate professional, I am particularly interested by a new trend in crowdsourcing that may very well change the face of real estate investing as we know it. Since Congress passed the JOBS, or Jumpstart Our Business Startups, Act in 2012, 80 companies have now thrown their hats into the world of real estate crowdsourcing in the hope of lowering the barrier of entry to real estate investing by opening the industry up to investors who have not have the credentials or financing to have gotten involved before.

When it comes to crowdsourcing for real estate investments, a little bit of cash goes a long way.

Real estate investment crowdsourcing works like this: instead of one investor ponying up the high amount of money traditionally required to claim an investment, many people contribute smaller amounts of funding, thereby distributing the ownership and control of the investments across every person who contributes. Then, crowdsourcing real estate investment firms, like a company called Fundrise, work with these investors to counsel them on best and wisest investment practices, brokering the deals as a company and divvying up the profit amongst the investors. In the case of Fundrise, specifically, a layman can become a real estate investor simply by paying a thousand dollar minimum investment. Other firms are stricter about who can participate in these deals; some limit participants to investors who are what the SEC defines as “accredited investors,” or people who make an annual income of $200,000 or more or have assets worth more than $1 million in addition to their primary home.

Of course, there are some pitfalls to this new method of real estate investing. The companies behind real estate investment crowdfunding do charge their investors fees, both on total investments and again if the property in question sells. And traditional real estate investment firms have expressed concern about allowing inexperienced investors to participate in such large-scale deals, largely because they feel such arrangements open the door to unwise investing and the potential for tremendous financial loss if the investors aren’t given good advice.

Regardless, the invention of real estate crowdsourcing is ushering in a new era of investing and may very well turn out to be a major disruptor to an industry that has been virtually impossible to break into without the right connections in the past. And, as always, as long as you make a point of educating yourself about your financial health and options for investing, the better the likelihood will be that you’ll make informed investment decisions and end up turning a profit as a result of your hard work and efforts.

Real Estate Made Simple

Tag: Investing

10 Red Flags When Considering a Real Estate Investment

Real Estate Investing 101: From Cradle to Grave Part Two

Real Estate Investing 101: From Cradle to Grave Part One

Co-Founder of PayPal Launches New Credit Startup

How Crowdsourcing is Changing the Face of Real Estate Investing